11 January, 2018
Regulation 14
On 4 December 2017, the Head of BKPM issued Regulation No. 14 of 2017 on Guidelines and Procedures for Capital Investment Implementation Monitoring (Regulation 14). Regulation 14 was issued to accommodate the new BKPM regulation on capital investment licensing and facilities (ie, Regulation 13), which was also issued on 4 December 2017 (click here). Regulation 13 and Regulation 14 were made available to the public in the evening of 15 December.
Like Regulation 13, although issued in December 2017, Regulation 14 will become effective:
- on 2 January 2018, for BKPM
- at the latest on 2 July 2018, for provincial/regional investment boards
Once Regulation 14 is effective, the current BKPM regulation, (ie, Head of BKPM Regulation No. 17 of 2015 on the same matter (Regulation 17)), will no longer be valid.
Implication for Investors
Investors need to bear in mind that online systems at BKPM (known as SPIPISE) will be updated to accommodate both Regulation 13 and Regulation 14. As such, starting from 2 January 2018 we advise reviewing thoroughly the SPIPISE online system before accessing it (eg, looking out for perhaps changes in the reporting forms).
Key Changes
The following are key changes under Regulation 14.
Introducing monthly reporting obligation for checklist commitment fulfilment (Article 10)
The prioritized services (layanan prioritas) under Regulation 13 will be implemented through completion of requirements set out in a checklist form. Regulation 14 requires companies holding a checklist issued by BKPM to report the development of their commitment under the checklist monthly until they start construction. The report is conducted by updating the companies' company folder at BKPM. Once the companies start construction, they will go to a quarterly investment activity report (LKPM) reporting.
Introducing LKPM reporting obligation for business licenses obtained without the need to first obtain investment registrations (Article 11)
Regulation 13 introduces a new concept where, subject to certain requirements set out in Regulation 13, companies can directly obtain a business license without the need to first obtain an investment registration. For this type of company, Regulation 14 provides that the semi-annual LKPM reporting is conducted once the companies have declared through the SPIPISE online system that they are in the production/operation stage. It is still not clear though whether, if the companies do not declare, their LKPM reporting remain quarterly, or whether they are able to choose not to declare even when they are already in the production/operation stage. We will need to see how the new SPIPISE online system is made to accommodate this provision.
Limiting access to correct submitted LKPMs (Article 11)
Under Regulation 14, the submitted LKPMs can only be corrected twice during the same submission period. Each correction can only be conducted at the latest two working days. Meanwhile, no limitation exists under Regulation 17.
Changing the annual reporting obligation of regional representative offices to semi-annual (Article 12)
Regulation 14 amends the reporting obligation of regional representative offices to become twice a year, at the latest on 10 July and 10 January (currently once a year).
Introducing reporting obligations for construction representative offices, and oil and gas representative offices (Article 12)
As Regulation 13 also regulates construction representative offices, and oil and gas representative offices, Regulation 14 regulates the reporting obligation for both kinds of representative office. Under Regulation 14, construction representative offices, and oil and gas representative offices must submit semi-annual reports to BKPM.
Removing the "cancellation" approval concept (Articles 24 and 25)
Regulation 17 allows investment approvals that have not yet been realized to be cancelled by the relevant authority, and also allows the holder of the approval to apply for cancellation of the approval to the relevant authority. Regulation 14 removes the "cancellation" approval concept. As such, whether or not investment approvals have been realized, the options available are only revocation followed by liquidation, or revocation not followed by liquidation (the requirements of which are set out in Regulation 14).
Introducing the first-last warning (Article 33)
Like Regulation 17, Regulation 14 also provides requirements to give three warning letters in case of noncompliance. However, for any of the following reasons, Regulation 14 allows the first warning letter to also be the last warning letter:
- not submitting LKPMs three times in a row
- failing to comply with the prevailing laws and regulations based on reports from the relevant government institutions – obviously investors need to be cautious due to the broad scope
The investors are given 30 days from the date of the warning letter to defend themselves and conduct rectifications. Otherwise, the investment approvals may be revoked. We have seen that since 2015 BKPM has started implementing its rights to revoke investment approvals in case of non-compliance.
Transitional Provisions
BKPM provides that the SPIPISE online system for the following reporting/applications will be started in stages, depending on the readiness of BKPM or the relevant provincial/regional investment boards:
- representative offices reporting – at BKPM will be started at the latest on 2 July 2018
- import realization reporting based on import duty facility – at BKPM will be started at the latest on 2 July 2018, or at the relevant provincial/regional investment boards will be started at the latest on 31 December 2018
- import realization reporting based on import licenses – at BKPM will be started at the latest on 2 July 2018, or at the relevant provincial/regional investment boards will be started when ready
- revocation approval application – at BKPM will be started at the latest on 2 July 2018, or at the relevant provincial/regional investment boards will be started at the latest on 31 December 2018 or when ready (as the case may be)
- representative offices closure application – at BKPM will be started at the latest on 2 July 2018
- branch office closure application – at BKPM will be started at the latest on 2 July 2018, or at the relevant provincial/regional investment boards will be started at the latest on 31 December 2018
Before the SPIPISE online system is ready, the reporting and applications are to be submitted offline/manually to BKPM or the relevant provincial/regional investment boards (as the case may be).
For further information, please contact:
Cahyani Endahayu, Partner, Baker & McKenzie
cahyani.endahayu@bakermckenzie.com
